There are several good books like this. As a retired professor at a large state university, I'm now convinced that the most dangerous place on a college campus is the Office of Student Aid. STAY AWAY. DO NOT ENTER. FIGURE OUT ANOTHER WAY TO GET YOUR DEGREE. TENS OF THOUSANDS OF ORDINARY STUDENTS DO IT EVERY YEAR.

As a recent graduate, I think the hardest thing was knowing how much debt was manageable. As it turns out, the rule of thumb of first years salary has worked out for me, but while in college, I had no idea what that first years salary would be. Like most college students, I didn't know specifically enough what I wanted to do to research potential salaries etc. giving students a realistic idea of what entry level jobs in your area really pay would be a big help. Not engineering, accounting, etc., but administrative assistants, program assistants at a non profit, case workers (lots of my friends who studied humanities have fallen into this), etc. Here in Chicago, I'd say $27k to $35k is realistic, but outside of urban areas its probably substainally less.

Regardless of whether you have money or not, my first question would always be, is this the most cost-effective way to achieve your end goal? In my book, that means consider public universities as the default option, then make a return-on-investment argument for why you need to go somewhere more expensive. Most kids won't be able to make a good ROI argument, but if your kids truly show potential, it may justify an MIT or Ivy League school.

I think loans should be minimized for undergrad as much as possible. You may be able to justify debt for a professional grad school where you know salaries on the other side will be sufficient to pay it off. Not so much for undergrad, where most 18 year olds have little clue what they will end up pursuing. I don't think federal student loans are much better than private loans - they can be almost as big an albatross.

Don't dismiss community colleges, especially if you have a self-motivated, well-grounded kid who won't lose sight of the prize just because he or she isn't on a leafy campus. They are a cheap way to meet basic requirements. Find a program that has a good feeder relationship with four-year universities. I've known people who go from community colleges to top public schools and Ivies, and they come out with the same piece of paper as the kids who paid twice as much.

ThatGuy wrote:Private student loans are the work of the devil, particularly because they cannot be discharged even in bankruptcy.

I disagree. My private student loans had by far the lowest interest rate at 2.75%. Some of my federal loans were at 8.5%. Honestly, I wish i had borrowed more from the private lender and less from the government. If you're going to take a loan then do yourself a favor and look at all the options.

3. If you still need more money, you need to go to a cheaper institution. Private student loans are the work of the devil, particularly because they cannot be discharged even in bankruptcy.

This is exactly right. Additionally, private loans don't have any of the protections of federal student loans.

A very small federal unsubsidized loan ($1-2K annually) might be considered very carefully, but nothing beyond that. Interest rates are 6.8% currently for unsubsidized, 3.4% for subsidized, and that may change for fall 2013 - Congress's current deal was only for 1 year.

I worked 30 hours/week during the academic year (double that or more in summers) to pay tuition. It can be done, if you manage your time well & if you have strong study skills. I took out loans that are roughly equal to today's average (with inflation considered), but my loans were at 8 or 8.25% (I also paid origination fees of 3 or 4%; today's origination fee for federal loans is 1%). I paid them off in less than 3 years by continuing to live frugally after graduation. I also saved on rent by sharing houses with several other people.

Affordability of an education often comes down to the choices people make. A cell phone that costs you over $10-15/month is not a necessity. Internet at home is not a necessity. A car is not a necessity. And beginning in 2014, we all will have real options for affordable, reliable health insurance (if you can't be on your parents' plan, thanks to the changes due to health care reform which allow people up to 26 to be on their parents' health insurance ... although this requires the parent(s) to have health insurance - which isn't always the case).

However ...the vast majority of today's students have no idea (1) how much they have in loans; (2) whether they're private or federal; (3) if federal, how much is subsidized & how much is unsubsidized; (4) what the interest rate is on each loan; (5) how much their monthly payment will be for their current loans.

I am always dumbfounded by this when I encounter it; I knew this information down to the last dollar (and I didn't have the luxury of just going to my student account online & looking it up, as many students can today). They also often don't know the terms of their loans, whether they can defer/forbear (or what those terms mean), and much other relevant information, despite all this information being easily available (and some even discussed in their entrance/exit counseling).

The lack of financial responsibility is pretty amazing. Parents are NOT ensuring their children have good financial management skills. STOP depriving them of the chance to develop them.

ThatGuy wrote:Private student loans are the work of the devil, particularly because they cannot be discharged even in bankruptcy.

I disagree. My private student loans had by far the lowest interest rate at 2.75%. Some of my federal loans were at 8.5%. Honestly, I wish i had borrowed more from the private lender and less from the government. If you're going to take a loan then do yourself a favor and look at all the options.

This isn't typical for most private loans. It's possible you had some with an adjustable interest rate, and you happened to be in repayment when interest rates were low. Frontline had a program (you can stream it online) talking about all the students (primarily at for-profit institutions) who took out massive amounts of private loans & whose job prospects were never going to be such that they could ever pay those loans back. Many lives have been ruined as a result.

z3r0c00l wrote:Go to a good state college and save your money, particularly for undergrad. The price premium on a fancy school is simply not worth it unless you can afford to pay.

+1 Save your loans for graduate school.

If you must borrow for undergraduate school, borrow no more than 1 year's worth of expected gross wages upon graduation. How do you investigate what gross wages are? Well, let's say you don't know your major - guess you will make administrative type job wages or less. That means you don't borrow more than $20-25K. If you are going to school for 4 years - that means you don't borrow more than $5-$6K per year. That also means you don't go to a school costing $41K per year, if you realistically think your lifetime career job answering phones will not pay more than $20-$25K. Some kids and their parents (keep up with the Joneses with those stupid college stickers on their rear windshield like it really matters ) need an intervention when they borrow these ridiculous amounts of money to attend because their friend/neighbor/school mate/guidance counselor/teacher told them it would be a great experience but what amounts to one big frat party for 4 years, then come out dumbstruck that they actually have to pay back the money. Guess what? those who provided the recommendation to attend will not be on the hook for repayment - You will!!!....for the rest of your youthful life.

Don't sign your name to any loan until you can define and understand the following terms:

Non-dischargeable - you sign it, you are on the hook "forever".Monthly Interest RateAPR (that is Annual Percentage Rate) - rate of interest paid compounded for an annual periodInterest Period - number of days in any given monthRepayment Terms - what you agree to when you sign your loan documentPromissory Note - the loan document that says....I Student ABC promise to pay.......for the next XXX number of months until all principal and interest due has been repaid in fullPrincipal and Interest (make sure you know how to calculate the monthly interest owed) - if that doesn't give you a heart attack, just give it a couple of months..... Borrowed AmountTotal Amount Due (hint...Borrowed amount plus cumulative interest paid)Payment Due Date

If the student knows these terms before committing, they will soon realize those 4 years of school is not nor will be a party!! How many parties have they been to where they bill you for the next 10 to 30 years? No beer,guy,girl or liquour is that good to place you in the bondage of non-dischargeable debt.

3. If you still need more money, you need to go to a cheaper institution. Private student loans are the work of the devil, particularly because they cannot be discharged even in bankruptcy.

I believe you have this backwards. It is the government guaranteed loans that are not (absent stringent circumstances) dischargeable in bankruptcy, pursuant to 11 U.S.C. Section 523(a)(8). I don't disagree that government-backed student loans are the work of the devil, though...

JT

P.S. I see where private loans are now also subject to the nondischargeability test. So you don't necessarily have it backwards, but forgot to include federal loans.

Thanks for the responses and the link. Yesterday I sat down with a college grad...from a public university no less. I was saddened to learn how much this person borrowed for 4.5 years of college obtaining a B.A. in Social work.

Just felt like getting some feedback with what some of you are doing or thinking in regard to this financial challenge so many face.

bottlecap wrote:I believe you have this backwards. It is the government guaranteed loans that are not (absent stringent circumstances) dischargeable in bankruptcy, pursuant to 11 U.S.C. Section 523(a)(8). I don't disagree that government-backed student loans are the work of the devil, though...

JT

P.S. I see where private loans are now also subject to the nondischargeability test. So you don't necessarily have it backwards, but forgot to include federal loans.

I'm less concerned by the dischargability of federal loans, because there are some reasonable, hard caps on what you can borrow. In addition to this, the feds pay all of your interest while in school up to 6 months after you leave. And you can always temporarily stop payment if you lose a job, or just don't make enough.

Conceivably, a student could take out the loans for a bachelors, enter a graduate program after a summer off, and not pay any interest until 6 months after leaving grad school. You could even pay off the low subsidized loans during a PhD program.

There are no such limits on the limit, or APR for private loans. In most cases, certainly every one I've seen, private loans are at a higher rate than the subsidized loans, and interest starts accruing as soon as the student takes out the loan.

I agree with the public school for undergrad approach. Sometimes, the best way to avoid debt is to take advantage of your tax dollars, especially given how many students end up changing their majors. Not everyone plans to attend grad school. For those who plan to obtain their undergrad degree, then venture out into their career - perhaps allowing their employer to help out with a grad degree, or maybe just forgoing it - it might prove more useful to minimize costs and debt via the public school approach.

Our daughter will graduate this summer from our state U. When she was in her senior year of high school, the honors nights and other events were sometimes a bit awkward, with everyone asking "So where's she going?". Being 10th in her class (of close to 300) and with my wife and I both having decent jobs, many assumed she was heading off to an expensive private school. And she did apply and was accepted to several. But our income levels were high enough to get no financial aid besides unsubsidized loans, yet not high enough that we could comfortably pay for a $200k education.

Unlike many strong students, who often pursue a STEM major, she wanted to major in Public Relations to take advantage of her writing skills. So she compared the programs for all of the schools to which she was accepted. We told her we could cover the state U (including room and board), and that if she wanted to attend one of the privates, that she'd have to take out loans and/or work to cover the difference. In the end, she decided she liked the state U's program better anyway.

Another thing that helped keep costs low was completing her degree in 3 years, which actually started before she entered college. Through a combination of AP and EEP (Early Enrollment Program) courses, she entered college with 19 credits. Then she added 6 more from a summer internship after her freshman year, totaling 25. That internship was with the school's Marketing & Comm. Dept. and turned into a part-time job the past two years. The summer after her sophomore year, she had a full-time internship at a local insurance company ($17/hr, but no credits). The last couple years, she also took a couple 4-credit courses. Now, after just 3 years, she will graduate after one more internship this summer. And we are confident that her having had three internships plus two years of part-time experience, along with her campus tour guide and School of Communications peer adviser jobs, will provide her with an advantage during her upcoming job search.

So for those who are fortunate enough to discover their strengths, talents and discipline during high school (I sure wasn't! ), getting a jump start while in high school, combined with a public college education, can help keep costs low. Even if parents can't help out, at least the loans will be much less than from a private school. I'm not suggesting that this approach will work for every student or for every major. But we're reasonably sure that the school name on the degree wouldn't have mattered as much as the experience gained for a PR degree. And with her scholarships, the total tuition/room/board costs for her degree only set us back around $50k.

I will suggest a rule of thumb. A student can generally safely borrow an amount equal to the cheapest new car you can find in the US. Some students majoring in a subject with an unusually good employment outlook might be able to borrow up to 20% more. On the other hand, majors with less than average employment prospects should borrow at most 20% less. This was all I borrowed and it was as much as I could comfortably handle.

We paid my sons major expenses to go to a state university so his situation was a bit different but here are a few things we told him.

When my son was in high school I only half-jokingly told him that when we dropped him off at college that we were going to drop him off at the job placement center and not the dorm since he was going to a vocational school get started in a good career. He was free to pick whatever major he wanted even if it was not a high paying one but it had to have a good placement rate for the graduates.

We also set the ground rule that the only jobs he could work during the school year were ones related to his major. We figured that instead of him working a lot of hours each week in some minimum wage job that it was much more cost effective for him to take extra classes since the only cost for extra classes above 15(?) hours was the books and lab fees. He was in Computer Science and he ended up getting a job at the campus computer center which gave him good work experience.

That is some good advice and guidance you gave your children. It is such a delicate topic when you talk to somebody not your own...you don't want to discourage them from pursuing their dreams, yet, I worry when they might not be thinking practically enough.

They don't get the weight of debt, or seem too often not to be able to weigh it properly when making decisions about which majors to pursue or how much to spend on it.

I wish more parents...and guidance counselors would find a way to get our idealistic youth to look at the reality of student debt is a logical fashion.

I know everyone is going to hate this advice, but it is what it is....

Do everything you can to make sure you can get a job after you graduate. What is the number one thing you can do? Pick a major where you can actually make a reasonable living after you graduate. I am not a believer in the "follow your passion" advice. The idea of getting an art degree from some private college and paying $50k per year to do it seems crazy to me! I also saw the Frontline program mentioned above and it was full of sad situations but also full of dumb mistakes. Most of the kids in that show had gone to private colleges, or out of state colleges (or are preparing to do so) and obtained degrees which have low prospects of employment. Then they are surprised they have huge loans and no fancy job. I dont get it. I love Frontline, but I dont agree with the approach they took on this episode

I am not a parent. Perhaps one day, when I have kids, I will feel differently. But for now, to me, it seems irresponsible of these kids' parents to let them go to expensive schools and get degrees which will make the job market hard for them upon graduating.

My advice would be the following:1. Pick a major which interests you but also has a reasonable job prospects after graduation.2. Work during your college years and use that money to make your loan burden less (ie. take out less loans and use your income to help pay tuition and rent).3. Go to an in-state State College. Dont buy into the hype for a prestigious private or Ivy school unless you plan to be in the top 10% of your graduating class, and are in an employable major. Dont go out of state when in-state colleges are often just as good. Especially for some stupid reason like trying to get away from your parents.4. If there is a college in your hometown, consider living with your family while going to school to save money.5. I agree with the above poster who suggested Community College. They're not only good at educating for cheap, but they can also really help people mature before they get into a 4 year.6. Make friends with everyone you can in college which will help you get a job afterward (mentioned above too).7. Try to get an internship in your field or some other kind of real world experience. I'd even work for free a few hours a week during the summer if it meant I could get some real world experience under my belt!

OP, thanks for helping these kids with your advice. I wish more kids had people helping them make these life changing decisions.

Vlaak,I tell my friends to double major with one degree that is their dream and another that will be a fall-back even if it takes an extra quarter or semester. So that art appreciation degree isn't working out? Good thing they're always hiring accountaints!

The advice of "do what you love and the money will follow" is terrible advice. There are many areas where there just isn't much money to be had, no matter how good you are (like social work). If you still want to go into a career that is guranteed to have low pay, that's fine but you should make sure you don't take out any loans and accept the fact that you will probably always be poor (that's not the worst thing in the world, but don't complain about it later on when it was your choice).

I think certain passions are better suited to being hobbies or side jobs than full time employment, especially anything like writing novels or painting. If it takes off then you can make it your career, but until then you are going to need a day job.

sapocanhoto wrote:The advice of "do what you love and the money will follow" is terrible advice. There are many areas where there just isn't much money to be had, no matter how good you are (like social work). If you still want to go into a career that is guranteed to have low pay, that's fine but you should make sure you don't take out any loans and accept the fact that you will probably always be poor (that's not the worst thing in the world, but don't complain about it later on when it was your choice).

I think certain passions are better suited to being hobbies or side jobs than full time employment, especially anything like writing novels or painting. If it takes off then you can make it your career, but until then you are going to need a day job.

Excellent post. It drives me crazy when people complain about the shape they are in financially when they went to the most expensive private school they could find and majored in the most useless subject they could find. The combination of the two is lethal.

"I wish more parents...and guidance counselors would find a way to get our idealistic youth to look at the reality of student debt is a logical fashion."

My experience is that younger parents of college students don't have much more in the way of financial skills than their children. They're often loaded with debt themselves, and are unable to give much in the way of sound financial advice. I believe school districts can do a much better job of providing financial advice to the college bound WITH ADJUNCT FEE-ONLY ADVISERS who are willing to tailor their presentations to this one particular and specific audience. This could be done in large auditoriums on four or five or weekends per academic year, with parents AND students in attendance, and parents footing the modest bill, no cost to the district. Guidance counselors would be the appropriate people to work up such proposals for presentation to the superintendent/board.

(FWIW, I professed 35 years at a large state university and I've seen it all).

Since I was going in-state at a public school, tuition was not that bad, I went pay-go, taking advantage of the controller's office installment plan, three payments a term. So my cash flow was a little more manageable that way.

Figure out the system of how aid works. It's about waay more than just loans. Learn about FAFSA, CSS, EFC (Expected Family Contribution), need-based aid, loans, etc. and a lot more. Ideally, the parents and the high schooler should have been planning since middle school, or the very very beginning of high school. The system is a bit complicated and sometimes counter-intuitive.

ThatGuy wrote:1. If you need more money than what is provided by parents and scholarships, get a part time job.

This advice is not always true. If you are receiving need-based merit aid, you only have an x allocation a year that you can earn. Once you are earning more than this level, you might actually be cutting into your scholarships.

The short form is that it is pretty much impossible to pay less than the Expected Family Contribution. Only way is to make sure it is small from the outset - have parents put more money into IRAs, 401k, pay off the mortgage a bit, etc. Minimize assets in one's own name and have them with the parents' names instead.

Elite private institutions don't necessarily cost more than public schools. For a lower-middle class family, if their kid can get into Princeton, Harvard, et al, the family might actually be paying less than if the child attended a state flagship. Generally, the higher ranking (and larger the budget the school has), the more generous the need-based aid.

sapocanhoto wrote:The advice of "do what you love and the money will follow" is terrible advice. There are many areas where there just isn't much money to be had, no matter how good you are (like social work). If you still want to go into a career that is guranteed to have low pay, that's fine but you should make sure you don't take out any loans and accept the fact that you will probably always be poor (that's not the worst thing in the world, but don't complain about it later on when it was your choice).

I think certain passions are better suited to being hobbies or side jobs than full time employment, especially anything like writing novels or painting. If it takes off then you can make it your career, but until then you are going to need a day job.

Excellent post. It drives me crazy when people complain about the shape they are in financially when they went to the most expensive private school they could find and majored in the most useless subject they could find. The combination of the two is lethal.

Yes, but sometimes the receipient of the advice doesn't want to hear it. You were 17 once, you know you think you've got the world on a string and you know everything or you can figure it out as you go along. I gave a relative sound advice - after that I got the silent treatment while this person majored in arts after spending some serious moola (parents money plus loans) in a very well-known and highly ranked university only to come out working in a job that didn't break past 24K in a very costly NYC (in that field you have to go where the work is ). Academically smart does not always translate into having common sense. Today, that person is now in grad school trying to climb out of a very deep hole.

brianbooth wrote:Vlaak,I tell my friends to double major with one degree that is their dream and another that will be a fall-back even if it takes an extra quarter or semester. So that art appreciation degree isn't working out? Good thing they're always hiring accountaints!

sapocanhoto wrote:The advice of "do what you love and the money will follow" is terrible advice. There are many areas where there just isn't much money to be had, no matter how good you are (like social work). If you still want to go into a career that is guranteed to have low pay, that's fine but you should make sure you don't take out any loans and accept the fact that you will probably always be poor (that's not the worst thing in the world, but don't complain about it later on when it was your choice).

I think certain passions are better suited to being hobbies or side jobs than full time employment, especially anything like writing novels or painting. If it takes off then you can make it your career, but until then you are going to need a day job.

Excellent post. It drives me crazy when people complain about the shape they are in financially when they went to the most expensive private school they could find and majored in the most useless subject they could find. The combination of the two is lethal.

Yes, but sometimes the receipient of the advice doesn't want to hear it. You were 17 once, you know you think you've got the world on a string and you know everything or you can figure it out as you go along. I gave a relative sound advice - after that I got the silent treatment while this person majored in arts after spending some serious moola (parents money plus loans) in a very well-known and highly ranked university only to come out working in a job that didn't break past 24K in a very costly NYC (in that field you have to go where the work is ). Academically smart does not always translate into having common sense. Today, that person is now in grad school trying to climb out of a very deep hole.

This brings to mind another great piece of advice I wish I had had before going to school. I went to school in Chicago. I convinced my parents that it would present great opportunities, and it did in many ways. However, because it was so expensive to be here for college, most of my friends are right back in their hometowns with their parents. Meanwhile, lots of my friends in Chicago nowadays went to inexpensive state schools and could afford more mobility when they graduated. Don't sell your future.

centrifuge41 wrote:Figure out the system of how aid works. It's about waay more than just loans. Learn about FAFSA, CSS, EFC (Expected Family Contribution), need-based aid, loans, etc. and a lot more. Ideally, the parents and the high schooler should have been planning since middle school, or the very very beginning of high school. The system is a bit complicated and sometimes counter-intuitive.

ThatGuy wrote:1. If you need more money than what is provided by parents and scholarships, get a part time job.

This advice is not always true. If you are receiving need-based merit aid, you only have an x allocation a year that you can earn. Once you are earning more than this level, you might actually be cutting into your scholarships.

The short form is that it is pretty much impossible to pay less than the Expected Family Contribution. Only way is to make sure it is small from the outset - have parents put more money into IRAs, 401k, pay off the mortgage a bit, etc. Minimize assets in one's own name and have them with the parents' names instead.

Elite private institutions don't necessarily cost more than public schools. For a lower-middle class family, if their kid can get into Princeton, Harvard, et al, the family might actually be paying less than if the child attended a state flagship. Generally, the higher ranking (and larger the budget the school has), the more generous the need-based aid.

That last point is important. My brother attended Princeton a few years ago, and my parents are solidly middle class. He qualified for a fair amount of need based aid, which they provided in the form of grants rather than loans. I believe several of the top Ivy League schools have started doing this now. My parents ended up paying a few thousand a year out of pocket for his education.

brianbooth wrote:Vlaak,I tell my friends to double major with one degree that is their dream and another that will be a fall-back even if it takes an extra quarter or semester. So that art appreciation degree isn't working out? Good thing they're always hiring accountaints!

[edited to remove redundant sentence] I think you're badly under-estimating the amount of extra time (and money) to double major in disparate disciplines. Yes, you can use the courses from one degree to fulfill the non-degree requirements of the other, but there's a huge between taking into business courses as an art major, and taking a full load of courses. The local university requires 48 hours of business courses, with 36 hours of those upper division.

It's one thing to double up in say math and science, or computer science and engineering, where a lot of the courses will fulfill major requirements in each, and taking two separate paths at the same time. I was a "undecided" in my early days, but trying to follow English and Physics at the same time. When I got to junior level, I had drop one (English) and commit to the other. Even trying to double in Math was just too much.

brianbooth wrote:Vlaak,I tell my friends to double major with one degree that is their dream and another that will be a fall-back even if it takes an extra quarter or semester. So that art appreciation degree isn't working out? Good thing they're always hiring accountaints!

I think you're badly under-estimating the amount of extra time (and money) to double major in disparate disciplines. I think you're badly under-estimating the amount of extra time (and money) to double major in disparate disciplines. Yes, you can use the courses from one degree to fulfill the non-degree requirements of the other, but there's a huge between taking into business courses as an art major, and taking a full load of courses. The local university requires 48 hours of business courses, with 36 hours of those upper division.

It's one thing to double up in say math and science, or computer science and engineering, where a lot of the courses will fulfill major requirements in each, and taking two separate paths at the same time. I was a "undecided" in my early days, but trying to follow English and Physics at the same time. When I got to junior level, I had drop one (English) and commit to the other. Even trying to double in Math was just too much.

Brian

This. Might as well go to the expensive private school that offers you no financial aid. That could easily extend your undergrad studies another full year or more and increase the total cost 1/3.